Episode 569: Richard Baker: Entrepreneurship Lessons From Billion Dollar Deals and Bold Risks

26:55I think I made many, many, many, many of the right decisions. And the weight of going slow would have been so bad that even the decisions I made that were wrong, I did the right thing. But I move very quickly. I make decisions. They're not always the right decisions, but we make them work. Do you think that's probably one of the top skill that people need to have to be successful as an entrepreneur? Absolutely. And, you know, being an entrepreneur requires courage. So you have to. And I think it took me a long time, probably too long to have enough courage to push back harder on the operators than I did.

27:33And because I know the business and it took me a while to learn it. And I wish I had been had more pushback earlier on, more confidence. So did you naturally have a lot of these skill sets? Like, because you could have easily, excuse me for saying this, but, you know, given your back, like your generational situation, you could have been an epobaby, but you weren't. Do you know what an epobaby is? Yeah. So, so look, I'm a, I'm a worker bee. So, you know, I'm in the trenches. I'm in the trenches. I'm out there doing it. And, um. Is that a nature? Do you think that you believe in nature versus nurture?

28:12Like, cause that either you have, like, it sounds like you have an in, like it's in your DNA. I totally believe that all of us have certain things. And, and by the way, the worst parents could mess you up a bit. And the best parents on earth can have a kid that just has the wrong DNA pieces. And no matter, and you're like, why is that kid such a screw up? The parents are so lovely. So we all come out the way we come out. And so I'm a crazy entrepreneur. I run around, do different types of businesses. I then went from Lord & Taylor and I bought the Hudson Bay Company. Wait, say on Lord & Taylor.

28:50I want to get finished with this. There's no finishing. It went on and on and on. Did you make money off of Lord & Taylor? We made a lot of money on all the ventures that we did. I'll give you a little example. In the end, we sold the building on Fifth Avenue to WeWork. So we work for eight hundred and fifty million dollars. But before they finished the full transaction, they had problems. And I flipped the building to Amazon for one point two billion dollars. So we did, you know, we did very well in that one building and we had 48 other buildings, some of which we sold for one hundred million dollars and fifty million dollars.

29:29And we made money in all those years during the process. So we did very nicely in each of these transactions. I would say so. But wait a minute, because that I know about that deal that you sold the wasn't the Saks, the Saks of Fifth Avenue. The Lord and Taylor building on Fifth Avenue. That was the one. OK, so that was in what year did that happen? That happened in 2000 and like 16. In 2016, you sold that building for a billion to it. I sold the building for eight hundred and fifty to Adam Newman at WeWork. at the closing, Adam showed up$150 million short. So he says to me, I need you to give me a preferred equity investment of 150.

30:12So I go to my father and my partners and I say, what should we do? He doesn't have the money. And they're like, who cares? The building isn't even worth close to 850 million. So you'll take a piece of paper and even if he never pays you the money, you still did better than what the building was worth. Wow, okay. So then he closes on the building. I have a$150 million preferred equity piece. So when he had his problems, he's a brilliant guy, by the way, whatever. But when he had his problems, I was in the mix because I was the preferred equity. So when it came time to making the deal with Amazon, me along with a series of folks from WeWork helped get that deal done.

30:51Now the$150 was worth more because they sold the building for$1.2.50 to Amazon. who, by the way, that building's worth double today. And Amazon killed it, made over a billion dollars on that one deal. Wow. So then that's just that one building from Lord & Taylor, right? So how much overall cumulatively did you think you made from the Lord & Taylor deal? We did just fine. Well, no, I want to give people some perspective. It's complicated. It doesn't have to be exact. Okay, we invested$25 million. We got all our money back in 18 months, and then we made a lot more. So the whole deal was 1.2 back then.

31:28Right. And we put in$25 million in cash, which we got back a year and a half later. The problem is we just kept, I got my money back. Now I just kept merging. I never put any more money in. Now we merged Lord & Taylor with Hudson Bay. Okay, now get to that. Okay, so how did that happen? How are you finding these opportunities? Do you have a knack for sourcing and finding these opportunities? Yes. How do I do that? Because I get off my ass. I meet people. I talk to people. I'm inquisitive. I learn. And each of these companies I worked on for years and thought about it, put the pieces together. And Hudson Bay was really poorly operated in Canada.

32:11And the Lord & Taylor team was strong. So I was able to buy the Hudson Bay company and merge it with the Lord & Taylor company, which was crazy, merging a U.S. department store chain with a Canadian department. I'm going to ask you about that. How did you do that? Because Hudson Bay wasn't in the U.S. And how much did you buy Hudson Bay for? Okay. I bought Hudson Bay and closed on July 19th, 2000 and 2008, right before the great financial crisis. and I bought the company for approximately 1.2 billion Canadian, which was at par at that moment. And the company would have been bankrupt three months later with the pandemic.

32:56But because we had the support of Lord & Taylor to help it get through that period, we were able to get through the financial crisis. What happened was I took this company that they were running atrociously. I broke it up into pieces. I got great teams to run the Bay Department store, the Hudson Bay Department store, the Zellers, the Fields, and the different operating companies that they had. When I bought the Hudson Bay company, they had over$7 billion in sales and 72 ,000 employees. So on July 19th, I had created a new company called the Hudson Bay Trading Company, which was a holding company that now own Lord & Taylor and the Hudson Bay company.

33:38At that point, I became what unfortunately is the last governor of the Hudson Bay Company, which is the first governor was in 16. I'm losing my mind here. 1650, 1662 was Rupert was the first governor. Continuously operated. You learned in school operating company. And so now I was the governor of the Hudson Bay Company. We had, I don't know, 80 ,000 employees at 42 years earlier. and it was all screwed up. And because this company was terribly run and now I merged it with the other companies. I took the top, merged the two companies of the top hundred executives. We exited 97 of the top hundred executives in the first 90 days.

34:26Just imagine that crazy thing. And we brought in new people. We broke the company up into different pieces. We got it stable. We had one guy by the name of Don Watros, who was our chief operating officer, saved the company. He put us in a position from the closing in July till October of that year where he cut$500 million a year of operating expense out of the company. The good thing about buying really badly run companies is often there's a lot of savings you can make. And he cut that and the companies ran better without that expense. So he got us through. Then a crazy thing happened. We got through the financial crisis.

35:06Now it's early 2010. And actually, yeah, it's actually September of 2010. And I get a phone call from the CEO of the Walmart REIT. And he says, can I come and see you, Richard, in New York with the CEO of Walmart Canada? And I said, sure. I knew something was crazy because Walmart had never, ever come to visit me. You always went to Bentonville. They never came to visit you. And here they were coming to New York to visit me. So they came and they said, Richard, we hear that you're negotiating a deal with Target to buy Zeller's. You remember Zeller's well. And Zeller's was like 400 stores of kind of like the Kmart of Canada.

35:56It is the Kmart of Canada. It was the Kmart of Canada. So I said to him, well, I can't really discuss that with you. But why would you want it? You have all those stores. What he said obtusely was, we want to keep Target out of Canada so we can own all of Canada and we'll take all the stores. So he said, well, how much do you want for it? I said, I would like$2.2 billion. I said, what are you talking about? You just bought the entire company. This is the crap. You bought the entire company for$1.2 billion two years ago. How could you possibly want$2.2 billion for this? I said, well, I'm not selling you an operating company.

36:34I'm selling you a platform of real estate. So even though Zeller's didn't own any real estate, they had lease control at very low rents because it had been so many years. So I was selling Walmart access to the Zeller's leases and their average rent was$5 a foot. The market rent was $12 a foot. So if you took the$7, multiplied it by the square foot, used a 6 % cap rate, It came to$2.2 billion. So he's like, well, that's a lot of money. I said, think how much money you'll lose when Target comes to Canada and does$5 billion and takes away all your growth in Canada. I said, okay. So I said to him, but I want you to know I'm going to have a process.

37:15There's going to be Target and Walmart, and there's going to be one point of contact, me. No break brokers, no intermediaries. I am going to talk to the head of mergers and acquisitions and the CEO of Walmart Canada. And I'm going to talk to the guys at Target. And there's no one in between us. And whoever comes in and signs a no outs deal, hard deal for the highest dollar amount, gets it. Okay. So they leave. And what do I do next? I pick up the phone and I call Target because I wasn't working with Target. and I get the head of real estate on the phone from Target. And I say, Scott, if you guys ever want to come to Canada, this is your last chance because I have a buyer for Zellers and it's a perfect fit for Target.

38:06And you need to let me know whether you're interested. He said, okay, you know, we've looked at it over the years. I don't know. I don't know. I said, great. Called me back two days later and said, the CEO of Target wants to meet with you. Can you come and see us tomorrow? I said, yes. I flew to Minnesota, sat with the CEO and the CFO of Target and the head of real estate. And they said, we're interested in buying it, but we want you to exclusively talk to us. I said, I can't do that. I have another buyer, but I will tell you everything I tell them. It'll be an open process. And if you want to do it, then you'll do it.

38:41And they said, okay, we want your, these 50 stores, the best 50 stores out of 400 and we'll pay you$500 million. I said, you're wasting your time. Forget about it. The business is worth$2.2 billion, and I'm not selling you those stores for$500 million. I got on the plane, flew home. Then Walmart, Walmart bid$800 million. Then Target came back and they bid a billion dollars. And then Walmart bid a billion two. Now it's Christmas time. I always thought I was going to make a deal with Walmart. How could Walmart possibly let, and I'm a Walmart guy and I knew everybody, how could this possibly go to Target?

39:17Now it's mid-December, about to go away for Christmas. And I have a deal with Target for$1 ,850 ,000 ,000, not including the inventory. So that would basically be a$1 ,850 ,000 ,000 profit after all the expenses. And I shake hands with Target. Walmart is kind of not responding because I don't think they believed the number when I told it to them. I was dealing with the CEO and CFO of Target. I was dealing with the second person at mergers and acquisition at Walmart. That's a lesson. So the people from Target say to me, we're ready to get a purchase agreement done. I fly to Minnesota with my same one real estate lawyer and my operating guy.

40:04And I get to Minnesota, the entire top floor of the law firm, Target's law firm. The entire management team of the Target Corporation is there. They have 20 different conference rooms with lawyers in each room and the head of HR and the head of logistics and the head of technology, you know, all these different groups. And we've spent four days, four and a half days negotiating a purchase agreement going from room to room to room, me and two guys and them with 50 people. And by Friday at noon, we had a completed purchase agreement and they had a board meeting at Target on Monday for two$900 million checks, wires, one on the day of closing and one 90 days later.

40:50And so I fly back to my office. I'm in my office. It's Friday at five o 'clock. The phone rings. My secretary comes in back when that's how it worked. And I had the CEO of Walmart and the CEO of Walmart International on the phone. They wanted to talk to me. So I'm like, all right, Here it comes. They figured it out. By the way, they both have spies on each other's companies. You can't believe what really goes on. Really? For sure. So now they're like, Richard, we understand you made a deal with Target for Canada, for Zellers. They were so nice and so gracious. We screwed up. It's our fault, but you can't sell it to Target.

41:29We are going to send a team to Westchester, to your office, and we'll get a purchase agreement signed by the end of the weekend and we'll pay you an extra a hundred million dollars. So I said, you're my guys. I can't believe we're sitting in this position, but I can't do it. And, you know, sometimes in life, you know, character and integrity, a hundred million, I don't know what would happen if they had said 200 million, but for 100 million, I had, I was able to have character and integrity for a hundred million dollars. And, um, uh, and, uh, I said, I'm sorry. I shook hands with the nice people from Minnesota.

42:04And if their board turns it down on Monday, I'll be back to you and we'll make whatever deal that you want to make. But I have to go with this deal. So they said, we understand. No worries. You know, sorry, we screwed up. They were really gracious. So by Monday, Target approved the deal. They signed the papers and they wired me$900 million in cash the next day. and my father, who had been very grumpy since writing his share of the$25 million check, was all smiles, never said another aggravated thing to me again for the rest of his entire life. And everyone was very happy. It was a great win. Is that why Target?

42:48Then, of course, you just can't make it up. Target thinks they're so smart. I told them they should come in incrementally and convert store by store and do it over time and keep all, they were so arrogant and they insisted on taking the Zellers name off of every building. They insisted on firing 30 ,000 Zellers employees. They wanted nothing to do with the word Zellers. By the way, I still own Zellers at that. They didn't even want the name Zellers. They wanted the leaseholds. Right. And, um, and they screwed it up. So they came, they spent$5 billion converting everything and doing this. And within two years, they fired the CEO and they bankrupted Target Canada and closed the entire thing down.

43:33And Walmart ended up getting everything they wanted anyway. Oh, my God. I was going to actually ask. Is that the craziest story ever? Okay. First of all, I was going to actually ask you about that because you were the one who brought Target into Canada in the first place. That was a big deal, I remember. It was. One of the most, we made a billion, eight hundred and fifty million dollars profit after having bought the company two years earlier. Because I remember that was such a massive deal, like in terms of not just a deal money-wise, but like everyone was so excited about Target coming in. And it was expensive, by the way, when they brought Target in.

44:09And Walmart is so prevalent in Canada. So that was you. That was all me. That was all me. And you, I understand, are from Winnipeg. You know how many times I was in Winnipeg? I have a lot of friends in Winnipeg. You do? I do because the people from Winnipeg say that everything in Canada revolves around Winnipeg. So Winnipeg is the center of Canada. And you never would, as an American, I never would have believed it. But I kept finding myself in Winnipeg right up until. I've never heard that in my life. Right about right up until the pandemic when I got a call from Grand Chief Jerry Daniels, the chief, the Grand Chief of the First Nations people based in Winnipeg.

44:55In Winnipeg, yes. Yes. So he came to visit me and I gifted on behalf of the Hudson Bay Company, the Hudson Bay store in downtown Winnipeg. Yeah. That big building, which is now under construction to be a spectacular new First Nations building. I know exactly what you're talking about. On Portage and Main or whatever. Oh, my God. But that's crazy. I can't believe you think whoever told you Winnipeg was like the center. And by the way, it is because I kept finding myself there. There's something about the business and, you know, there's a lot of there's a lot of agricultural wealth and, you know, natural resources and trains and things that go through Winnipeg.

45:37And anyway, used to be I mean, it was quite a quite an impressive city at one point. Long time ago. Well, well, before your grandparents. OK, well, yes. But I mean, a lot of great people come from Winnipeg. A lot of like smart, successful people. I'm not just saying that, but it's true. But I live in Toronto. It's a real place. Yeah. Well, they lived in Toronto for many years. But, and my sister and my mom now live in Montreal. But that's neither here nor there. So that's really interesting. I hope when the Canadians listen to this part, I'm going to actually clip this part for all the Canadians because this is really interesting because this was a massive thing back then.

46:11And then Winners, do you remember Winners? Yes, of course. Winners is part of what ate up the Hudson Bay business over time. Really? Yeah. So Winners is owned by TJ Maxx, of course. Of course. And they do very well in Canada. And now that I had nothing to do with Winners, they're the very dominant retailer in Canada. And you were never involved with Holt Runfrew. Never involved with Holt Runfrew. OK, what has there what has there been a deal that you passed up that you regret that you should have actually done? So I'm really like a stalker. So I, in 2005, I wrote a memo to my team, my little team, and I said that we should buy Lord & Taylor, the Hudson Bay Company, Galleria Kaufhof in Germany, Saks Fifth Avenue, and Neiman Marcus.

46:59And we bought, that was in 2005, I was 39 or whatever I was, and we bought all five of those companies. It took me, Neiman Marcus, it took over 20 years to get them all done, but we had a plan. So entrepreneurs, as you know, we're not fly-by-night people. We're very thoughtful and tactical and have long-range plans, and we know what we're doing. Not always. Not always, but some are. And I think sometimes people think that entrepreneurs are a little flighty, and one day they're this, and one day they're that. I listened to your recent podcast on entrepreneurs and I took a little offense. Which one did you listen to?

47:43I have a lot on entrepreneurs. The one just a couple of days ago. What was it? Yeah, you kind of were bashing. You were bashing the not real entrepreneurs, the fakers. Oh, you mean the solo episode. Okay, that's like 10 minutes long. Yeah, it was 10 minutes long. So I listened to that. So I think one of the great things about the United States is this wave of entrepreneurism that's going on that's exploding. And in other places like Europe or in Asia, they don't have this culture of entrepreneurship. They rely on the government to take care of them, or they rely on big companies to take care of them.

48:19And in the United States, we talk a lot about this philosophy of being a zoo bear or a jungle bear. A zoo bear is someone who maybe works at Goldman Sachs and they go in the morning and they get a little pellet at lunchtime and maybe in the afternoon they do a little dance and get a tap on the head and then they go home. A jungle bear is an entrepreneur and they eat what they kill. And if they don't kill anything, they die. And so any person who can figure out how to feed themselves by doing whatever it is that they have to do, I personally reward them with the entrepreneur banner. And if you're an Uber driver and you sell bagels on the side and you make jewelry for your sister-in-law, you're an entrepreneur.

49:13And what's going to happen in this country with AI and the change of what's going to happen in these corporations, people are going to need to take care of themselves in a much larger way than we historically have done. And it's going to be okay. And it's going to work. And people are going to figure it out.

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51:21Now, I want to get back to a couple of questions that you said that we didn't kind of circle back to. One is that when you're making the deal between Walmart and Target, one crucial point that people maybe not think about is who they're actually dealing with. The difference between dealing with the CEO versus the second in command. Or can you kind of just expand on that whole thing? So whenever you can deal with a decision maker, that is the way to go. And we all know that. And in this case, this was really important and a big deal for Target. And so the CEO and the CFO themselves were involved.

52:00While it was a big, important deal for Walmart, there's such a big company that they they kind of handed it down a little bit and they kind of lost a little moment there because they weren't as as on the ball as they should have been. So can you give people some advice or some kind of act like how does that happen? Every time you can maneuver your way to get to the boss, maneuver to the boss without without insulting the other people in the food chain. See, that's the problem. Like how do you maneuver to the top of the pyramid and not insult or offend somebody? That's a very tricky game. OK, so first of all, we talk about principles.

52:37One of the key principles is relationships. So you want to spend time and have relationships and meet people. And then you have friends and the friends have friends. And, you know, I'm working on something and a friend of mine called the boss of this other company and I started right at the top. So you use your relationships the best you can to get yourself to the top of the house. How much would you say of your success has been timing versus skill? Okay. People always say to me, oh, you're so lucky. How did you get that done? And how did you get that done? The answer is I manufacture my own luck.

53:12And because I work harder, I'm more prepared and I make it happen. I'll give you an example. So if you have little kids and you go out, watch them play soccer, they're all running, chasing after the ball. But there's always one kid who always ends up with the ball and makes the goal. That kid understands where the ball's going, not where the ball is. And so if you want to be successful, you have to be a little more strategic and understand where the world's going. So when the ball pops out, you're the one who got the ball and you make the goal. And I spend a lot of time thinking about the world, being strategic and understanding so that I'm in the right place when it happens.

53:53This boom that you're on with entrepreneurs and this energy and all the things that you're talking about, you're of the moment. You are in the right place at the right time. This is going to explode 10 times. You think it's big already. Entrepreneurs are going to be 10x what it is that's going on now. And who's talking to them? And you think in your space, oh, there's lots of people. There's not. And if you look at our entire educational system from kindergarten to graduate school, the amount of programs, the amount of discussions on how to be an entrepreneur is infinitesimal. unbelievably small.

54:33So the people who are going to be able to coach and show people the road on how they can be successful being entrepreneurs, I think is a big opportunity. And that's part of what I'm trying to do is help people. I've always been interested in helping. And, you know, I've worked with Cornell for over 20 years. My wife and I support their Baker program in real estate, which is a two-year masters. And I've spent 20 years going up there, teaching people and talking about how to be a real estate entrepreneur. And I think there's more efficient ways to do it. People like you can tell the message and tell, lead people to what they need to do, how they need to think about becoming an entrepreneur.

55:17Because what's going to happen is every company that has 200 vice presidents, guess what? They're going to fire right now, half a hundred of those vice presidents. What What are going to happen to those hundred people? They're not going home to hide under their beds. Some of them maybe. The rest of them are going to be like, I need to figure this out. And there's no job for them. So what are they going to do? They're going to become entrepreneurs. And if they're newscasters for CBS, they're going to create podcasts. And they're going to create their own way of talking to people. If they're in the architecture space, they're going to go steal one of the clients from their firm and have one client and make enough money for that one firm, you know, that one decision rather than being an employee for the architecture firm.

56:02So there's going to be an explosion of entrepreneurs in this country. And the productivity in this country is going to go through the roof because using Claude as an entrepreneur is unbelievable. I spend two hours every single morning talking to Claude and plotting and working and figuring stuff out. and that's where the world's going. So can you talk about this AI for a second? Because that is where the world is going. But because of that, there's also this, I think that you can obviously chime in, that there'll be a need for human connection. Like you've made your entire, your whole business was based around getting like, showing up in person, like going, talking, not just texting and not just sending some memo through email.

56:50You were very much face-to-face. Like that's your personality. That's my personality, by the way, too. We're losing that more and more and more. We're not losing it. People like us that can do that, people like the folks that are paying attention and following you, they have that. Now, instead of having 10 people who were the dead weight, building all of the processes and things that needed to be done so that the so that the entrepreneur could execute. Now, a good part of that could be done with the help of Claude. Yes. Okay. So when you say you do two hours with Claude, is Claude your favorite?

57:24Why are you using Claude? Okay. So what is Claude good for versus the other ones? I don't know. So look, I have many, many folks that work for me. It all started with me saying, ask ChatGBT and ask Claude. And then I got frustrated with having to ask them to ask Claude. And someone took 10 minutes and showed me how to do it myself, which, of course, allowed us to build this unbelievable relationship now. Now Claude knows everything in the world there is about me and how I'm thinking and what deals I'm working on and all of that so that it's very responsive. And it turns out that I spent my whole life prompting.

57:59So the key to the AI is prompting. Well, I used to say to Ryan, Ryan, what if we did this and did it this way, did it this way? He'd come back and say, I'll let you know in three weeks when I figure it out. Now I prompt Claude and Claude comes back to me in over 10 minutes and lays it out and helps me think through it. So then what I do now is I take, I build two, three, four Claude memos a morning. And then I send the Claude memos to my team members and say, what do you think of this? How can we execute this? So now the productivity I'm getting is mind boggling just from February to today. The level of advancement in this, you know, AI offerings for people like me has been incredible.

58:47Is Ryan going to have no job pretty soon? No, Ryan's going to have a job, but I won't need three Ryans. Yeah. And I'm going to need one Ryan. So what's so special about Ryan? Because you took you stole him from someone else. What did he have? I didn't steal Ryan. I built Ryan with Ryan's great help. And Ryan and I are partners. But Ryan knows exactly how I think. and you could go take Ryan in another room and ask him any question you ask me, and he can answer exactly the same way I can. In fact, Ryan built an AI Richard. You can go on our website, bakerhouse1921.com, and you can click on a button that says Ask Richard, and they have an AI version of me where they scraped all my clawed, all my emails, all my Instagram, and you can ask it real estate questions, and it answers just like me.

59:35Looks like me, talks like me. Ryan did this. Yeah. So how did you find Ryan? So can I get a Ryan? Because I think I need a Ryan. Ryan, do you have another person with you? We could build an AI Ryan for you. Yeah. Could you? So so Ryan worked on our team at Saks Fifth Avenue and was very talented. And when we decided to do this project, we brought Ryan into to lead the content piece. So you're doing all content, Ryan. Right. OK. But you told me before you went to Princeton for architecture. Is that what happened? And now you're like you guys working. We live in a world where we're all reinventing ourselves, right?

1:00:10The world keeps changing. And I was a real estate guy. Then I was an operating company guy. Then I was a digital guy. And I'm a deal guy. And right now, I'm an advocate for entrepreneurs. And I want to teach the world and help people be successful and take care of themselves. Because in the end, when they put you in the ground, it's not going to say he made this great deal and he owned all this real estate. It's going to say he helped a lot of people. And I got to spend a month in February in Costa Rica to rethink and reimagine where the world was going. Were you at ReCenter? You know what? Ben?

1:00:48Yeah. I wasn't there, but I met Ben. Oh, my gosh. So someone we work with is an investor in them. Did you like it? Yeah, I loved it. I was supposed to go there. I liked it. I thought it was great. So I rented a house on the beach near there, and I met Ben. This was Santa Teresa. Yes. And where apparently everyone goes for reset. Yeah. Like it's a world of broken toys on the beach there. Exactly. So all the broken toys are hanging out. So we all, so I had 80 people coming and going for a month to come and visit and say hello. I have had probably over 100 ,000 folks that have worked for me over the last 20 years.

1:01:27and I can call on almost any one of them today and they meet me, talk to me, spend time with me, help me. And because we had that kind of relationship with all these folks and I'm a builder of people. That's amazing. And yeah, so it's good. So this is my next stage in life. How can I be more helpful to help people transition into where the world's going? And how are you going to be more helpful? I'm going to teach people and give as much knowledge as I can and be as helpful as I can to folks who want to be entrepreneurs. And so far, we have a free summer internship. We have been doing free boot camps.

1:02:09We're going to have boot camps starting this fall that are sponsored by Cohn Resnick and Wilkie Farr. And we're going to be charging people for those boot camps. And we're going to create an ecosystem where entrepreneurs can get together and be comfortable. We're launching at Cornell, which is really exceptional, a living learning community. So I bought a Greek revival mansion on Cornell's campus and we're turning it into a private club for entrepreneurs. And it's going to have tremendous content and activities. And it's going to. For who? Like women, men, what age? So Baker House is going to be located at Cornell's campus.

1:02:50It's for Cornell students, undergraduate and graduate students. They can join this club. We're going to have 500 beds of housing in addition to the club. You can be a resident member or a non-resident member. And you'll have to go through the Baker House Boot Camp, sort of like initiation. And then you'll be an entrepreneur and be able to live and have this experience. And we'll have all kinds of content and activities, a gym, a Nordic spa. But what's really cool is I'm also building a craft center. I did a lot of research. And what I found is that a large number of very successful entrepreneurs and scientists were crafters, painters, sculptors, ceramics, cooking.

1:03:34And there's something about that creative and hands-on activities that generate our best scientists and our best entrepreneurs. So as part of this experience at Cornell, we're going to bring, I'm doing an entire building for crafting. It's going to be very cool. So I had so much interest in all of this outside of Cornell that we've decided to build and offer this Baker House boot camp, which, as I said, we're going to do. We're doing eight two-day Baker House boot camps this fall in New York City. So I don't know. We're going to create a community from the ground up. Yeah, so it's going to be fun.

1:04:14So the ones that you're doing in like eight two-day ones, where are they going to be? They're going to be in Manhattan across from Carnegie Hall in a in Cone Resnick's event center. And they're sponsoring it along with Wilkie Farr, another law firm. We have other people talking to us about how to get involved. So we'll see where it all goes. But who is going, though? OK, so let's talk about that. So the people that are excited about the Baker House Bootcamp are young entrepreneurs, people who want to change careers, veterans, very big group, retirees, white women, black women who want to be entrepreneurs, and they want to take control of their own life.

1:04:57They are tired of living in a world where, one, there isn't a job they can have that properly rewards them. Big problem. Or they're working somewhere for a bunch of jerk offs and they can't be successful and express themselves. One of the things that's most shocking to me is the low percentage of women real estate entrepreneurs. I can't quite understand why women are the most perfect, natural folks to be real estate entrepreneurs. They are used to running a household and running a complex family situation. They know how to fix things. They know how to execute. There's a women I feel are the dominating force in real estate agents.

1:05:38You forget agents. I'm not talking about real estate agents. What percentage of real estate entrepreneurs do you think are women versus men? Okay. Like the Barbara Cochran's of the world. Barbara Cochran's a broker and I don't count that. Okay. So give me an example who you would count. Yeah. You give me an example of anyone who buys and sells properties and buys them and rents them out and owns them. Think of all these buildings in Beverly Hills. I don't know many commercial. I know a lot that maybe flip homes and then sell those. Yeah. That doesn't count. That counts. But that counts. It's a small number.

1:06:11We're not sure of the number. We think it's about 10 to 20 percent of real estate entrepreneurs are women. Barbara Cockroach is a broker? Yeah. She started a brokerage firm. She's an entrepreneur and, you know, but for brokers. So, which is great. Brokers are great. Commercial broker, though. No, that was, she was residential broker. By the way, residential and commercial brokers can easily become real estate entrepreneurs and buy their own and own their own properties. We spend a lot of time teaching people how with very little to no money, they can own properties. That is a magical. You should come.

1:06:47You're invited. We're doing Joe DeSena from Spartan Races dreamt this idea up. I never. Why is it called boot camp? Because Joe made it up. Of course, because Joe's involved. Because Joe's involved. Joe made it up. So Joe sponsored the first Baker House boot camp, which is this weekend, June 26th, 27th, 28th in Vermont. We are oversubscribed. We have 50 people showing up. Is Joe going to make people like carry up pails of water up a mountain? Yes. While this is going on, Joe is running a death race. Yeah. Oh, my God. Forget it. No one. So my people aren't doing that. My people are getting wine and cheese and food.

1:07:25And mine's going to be very civilized. But in the background is going to be Joe's death race. Yeah. And but that's that's the opportunity. But the opportunity for women to become real estate entrepreneurs. This is the single best time in history for that to happen. Okay. So then that's a good segue into my next question is when you look at the real estate market today, where is the opportunity that most people are actually missing? Yeah. Okay. There's a huge opportunity for real estate entrepreneurs in, uh, think of, we were just walking around the outskirts of, uh, Rodeo today, you know, all those little buildings in the side streets and they have like a restaurant or retail and they have office or apartments upstairs.

1:08:11The United States, millions of those who owns those buildings. They're not owned by Blackstone and Vornado. They're owned by your uncle and your, you know, older folks. and they over the history and they used to have their jewelry store downstairs. And OK, what's happening is there's an entire generation of people that's going to pass away and is passing away. And those properties, their estate's going to get a stepped up value so they don't have to pay the tax because when they die, they get a stepped up value. So the estates of those folks are going to sell those properties because there won't be a tax disadvantage to sell them.

1:08:48And they don't want to own them. They don't want to own them. Oh, that was dad's hardware store. Now I live in, you know, Bermuda and I don't care about Winnipeg or whatever it is. And the local people in Beverly Hills and Winnipeg or whatever it is, are going to be able to buy those properties. They're going to re-tenant them and put a Pilates studio and a restaurant. And they're going to make the apartments cooler by putting in a cold plunge and a sauna in the basement. And they're going to be able to get traditional financing and be very tax efficient. They're going to be real estate professionals.

1:09:20They're going to get bonus depreciation. And there's going to be endless amounts of excellent investments for real estate entrepreneurs. And they're not going to be competing with Blackstone and people like that because they don't want those assets. And that's what's going to happen. See, I think there's so much to learn by this because I think that it feels complicated, is it? It feels complicated, but it's not. and in two days, I sit people down and I give them examples, tell them how to do it. The other thing that's really cool about our bootcamp is we match people up in groups. So in the first morning, we put together maybe a person who has a large bank account and maybe a person who's really good at running numbers and maybe someone who's a personality deal person, and we put them into groups and then we have them work for the two days as a group.

1:10:12and one of the things we talk about is learning how to have the right partner. The right partner is not someone that looks just like you. The right partner is someone who compliments you and has skills that go with your skill set. I think that's the name of the game, right? Not everyone has to be the same and they end up like a lot of times things fail because you want to mirror the person that looks like you, you know? And then you have the same qualifications and not the same, like you don't balance each other out. I want to come and do this thing. You should do it. Let's pick a date. I should.

1:10:45I should go do it. We'd love to have you. And you can come on. Let's find a date in New York in the fall, and then we'll build into it a segment where you and I can speak together. Yeah, because I think this is actually a really interesting opportunity for people because I think that people don't know what they don't know, right? And so they fall into these positions. They're selling a course on social media that seems like a much more lower barrier entry. But this is very engaging. Everyone said to me, do it online. I'm like, forget that. The whole point is you've got to get off your ass and go somewhere and learn.

1:11:20And this is not as profitable, not as efficient. But if you want to learn how to be a real estate entrepreneur, this is the best way in two days, very economically. You can learn all the tools. You can meet people. Then what we're going to do is we're creating a community online. So starting this Wednesday, we're launching something called Office Hours with me. And I'm going on for an hour or two hours, whatever it takes. Where? Where are you going? Okay. All you need to do is go on our website, bakerhouse1921.com, and you can sign up for free to go on our Office Hours. It's incredible. You can ask me or my team members questions, and you can listen to other people's questions.

1:12:02the not know what it costs to talk to your lawyer you have a real estate lawyer your real estate lawyer costs a thousand dollars an hour and uh we're gonna have people far better than that that you can talk to and ask questions more importantly you can hear other people's and done's two thousand an hour but anyway go ahead yeah yeah so um so anyway we're looking we're we're just trying to be helpful have fun create a community we we're there's nothing like this in the world this is a Cornell-based program that's authenticated by Cornell University. I'm teaching at Cornell. We have a club, a complex at Cornell University, and we are opening this up to people, anyone in the world who wants to learn about being an entrepreneur, and we're going to create communities so people can work together in order to be successful.

1:12:48I love that. Okay. Thank you for that. I have a couple more questions. Okay. Neiman Marcus acquisition. We didn't talk about that. It closed for$2.7 billion. How did you, like, again, value something that's actually struggling? That's the big question I'm coming back to a lot. Okay, so I owned Saks. How much did you buy Saks for? I bought Saks for$2.6 billion in 2013. 2013. Before you even tell me about Neiman's, is that like a flailing, like this brick and mortar in general, isn't that like a flailing business? Okay. There are industries in the United States that have tremendous headwinds and there's rational reasons and irrational reasons, whether it's media companies, magazine companies, retail, all kinds of businesses, tremendous headwinds.

1:13:44And many of them aren't going to make it and or they're going to be reorganized. So in 2013, when I bought Sachs, I had a plan. The plan was immediately to roll up Barney, Sachs, Neiman's, and Bergdorf Goodman into one company in 2013, not wait a decade to get there. Unfortunately, through a whole variety of reasons, it took me a lot longer to get to where I needed to go. During the process, Neiman Marcus went bankrupt during the pandemic. So that created a lot of problems. Just for people who don't know, why would somebody go into bankruptcy on purpose? Can you explain that? I think it's important for some people to know.

1:14:25We went into bankruptcy in January, Sachs Global, after having merged Neiman Sachs and Bergdorf's together. We went in in order to protect the business and the vendors. How does that protect a business? Um, vendors were concerned about the financial condition of the company. So they were concerned to ship goods. So if we hadn't gone bankrupt and they didn't ship the goods, the company could have gotten liquidated, which would have been disastrous. So in order to be careful and protect the business from getting liquidated, we filed for bankruptcy early enough that there were still assets and inventory and things.

1:15:06And now the company is getting reorganized by very capable people and is coming out of bankruptcy in the next week and will be around for a long time in a much better financial condition. So it actually can benefit the company because it saves the company. Yes. In this particular case, the goal was to bring Bergdorf's, Neiman's, Sachs, and the Barneys IP together in one company and save huge amounts of expense by instead of having two marketing teams and two IT teams, it was all going to be on one set of systems. Those synergies were going to save, are going to save$600 million a year. That was more than both companies were making in EBITDA.

1:15:46So that's enough to save those companies. So I'm very disappointed that the company went bankrupt, but I'm thrilled that we got all the companies together before they fell apart. Do you lose money on that? I lost a lot of equity going forward that I would have had. How much equity would you have had? Oh, a lot. Like how much? 80 %? Oh, I probably lost a half a billion dollars. And then so. But I made it, you know, I did the right thing for the I did the right thing for the vendors. I did the right thing for the employees of the company. And I'm very satisfied that this will be a strong, high-quality company going forward.

1:16:26And I'll just have to figure out how to make more money doing something else. I was going to say, what are you going to do now? Are you poor? Do you need a loan from me? Well, I'm going to walk my way back to the bus station and take the Greyhound back to New York after this. So I'm just fine. You don't have to worry about me. Trust me, I'm not worried. Don't worry, Jen. I'm definitely not. I'm just fine. I have a very nice business with my son and I have a nice family business and we have a good time and we do healthy things that are good. Okay, wait. So tell me something. So let's get back to the Neiman deal.

1:17:01But does that mean is your son working with you? Is that what you said? My son, Jack, runs our family real estate business. So we own 10 million square feet of Walmart anchored and other anchored shopping centers. How old is your son? My son is 29 years old, very capable, very disciplined, and he runs the real estate business. We also have a private equity business. He runs the private equity business. How big is the private equity business? Private equity business is a small boutique family office business. Okay. For how much? A lot. Like, are we talking$100 million,$200 million,$1 billion,$2 billion,$6 billion?

1:17:39If we added up the volume of all of our operating businesses, it's, you know, over$2 billion. Okay. And so is your son as driven and ambitious as you? My son is very thoughtful, very smart, very capable. People often think he's a lot like me, but the truth is he's a lot more like his mom, who's much more buttoned up, much more focused. But he has a very good mix of his grandparents, his mother, and his father. Do you have another child? I have an older son who's an artist. He's an abstract oil painter. I went to the Royal College of Art in London, and I have a daughter who's getting a degree in forensic psychology at John Jay in New York.

1:18:26But both of them are not involved in the business. Nope. Okay, so let's get to Neiman Marcus. So how did that come to be? You had these five companies that you wanted to get, and you got them all. I worked for over a decade to buy Neiman Marcus. Why? Why were you so obsessed with that one? Because merging it with Saks created the$600 million of synergies. So if you wanted to save the luxury multi-brand category in the United States, you needed to put them all together. They didn't work competing with each other. How come? Because there wasn't enough business? Because there just wasn't enough margin in selling other people's goods to support the kind of service level that people expected.

1:19:08What was the difference between the two of them? Not much. Right? Not much. They're the same stuff. That's why it was so much synergy. Yes. Because the same person who bought, you know, handbags could buy handbags for Neiman Sachs and Bergdorf. Yeah, they're very interchangeable. But Bergdorf felt more elevated. Bergdorf is special and more elevated, and they still have a separate team. But there's a lot of economies of scale putting all these businesses together. Like, what about Harrods? Where does that fall into the whole luxury? Harrods is— Well, it's not in the U.S., but— Yeah, it's a whole different— Ballgame.

1:19:39Yeah, whole different ballgame. But you never tried to buy Harrods. Wasn't interested in buying Harrah's. Wasn't on my list. Wasn't on your list. And we were just interested in cleaning up what was going on in the United States. And I feel very comfortable that we accomplished our goal. Right. I won't make as much money as I would have if we had not gone bankrupt. But I still feel good that we put it all together and did the right thing. Okay. So now, so the Neiman deal happened. Like, how did you know to do it? I had to raise$8 billion last year to merge Saks Fifth Avenue and Neiman Marcus together.

1:20:13It took$8 billion of capital, which we raised. It was a very difficult transaction to get done. $8 billion. $8 billion. And so all that money now, you lost the five. We didn't lose. The money didn't get lost. The money was used to refinance the business. The business going forward is going to be profitable. And the money that got lost was the equity that was put in the company. So that's my loss and other people's loss. And, you know, we're sophisticated investors and that's the way it is. So give me your three top learning lessons that you can give someone who's just starting out right now. Okay.

1:20:53First one is kind of similar to your philosophy is you have to have courage. I call it courage. You call it being bold. And I spend a lot of time now with young entrepreneurs, young real estate entrepreneurs, and biggest problem they have is pulling the trigger. They can't pull the trigger. And I don't want to be the one to hold their head underwater to pull the trigger, but having courage and being bold. Now, how do you have courage and be bold? My philosophy is you need to do investments that require no money. Easier to be bold and courageous when you're not going to lose any money. So I beg people, please do not borrow money from your in-laws and your friends and do not invest your money.

1:21:36Figure out how to make money with no money. And it can be done. It can be done day in and day out. And or a little bit of money, money that you can afford. That's the trick to having the courage and being bold to make a deal happen. Two other ones. Give me two other lessons. Two other lessons. Say it again. Sorry. I wanted three lessons that you would need to be successful as an entrepreneur. Okay. So you got to work harder than everyone else and have tremendous energy and be focused. It doesn't just, it's not a hobby. It doesn't just happen. You got to work hard. How important do you think likability is?

1:22:15Very interesting question. I think it's certainly a thing and I rely on it. I'm a likable person and it works. I know other people who are like kind of jerk offs and they still are successful. So, you know, being smart, being clever, being capable, those are very important features. And if you have all those features, maybe being personable isn't as important. But I always coach people to be social and be personable. And that's an easier way of going. I think it's very important. See, I always talk about the fact that I believe there's these underrated skill sets that are actually much more foundationally important for business than the overt ones, right?

1:22:57Just because you go to Princeton or Harvard, you can be academically super smart but not have any street smarts or not be very likable. And so there's all this data and research that I've seen and just in my own experiences and talking to a lot of people who do it very successful, who have been very successful. I've noticed that the people who raise the most money, it's because they're the most likable. The people who get the most opportunities because they're the most likable, because people want to work with people they like, not just people who are competent, right? I think there's a lot of these nuanced details, like devils in the details that are very important.

1:23:33You're right. You are likable. You're very affable. You've got a lot of levity. It would make someone rather be with you than some stick in the mud who's just extremely number-oriented, right? So, yes, but it's kind of a scary concept because in the end, if you're going to be an investor or you're going to work with someone, you want someone who's going to perform at the highest level. Yeah, you want someone who's competent. And you want someone who's competent. But we talk a lot about relationships. Business is all about relationships. So if you're not personable, then you can't have relationships.

1:24:09So I would spin what you're saying slightly different. And I would say relationships are super important and you need to go out of your way to make relationships and work with people. By the way, that's not being an opportunist and searching for that person that happens to be the one person that's going to help you. My wife and I have a philosophy. We wake up every day and we try to just do the right thing and we just help anyone that we can help. And it is the most magical win. I help someone that just was a random person or whatever. Next thing I know, that person knew someone that I was working on a deal.

1:24:44And if everyone just woke up every day and did the right thing, that is the way to be the biggest opportunist. It will come back to you in a thousand ways. You and I are very similar. We think similar. I always say that the people that help you the most in life are the people you least expect. So you've got to be nice to everybody and always start with how you can be helpful to them. Which comes back to where you started. Exactly. If you're a person that likes people and is a nice person, good things happen. I also think being very curious is the gateway to opportunity. Because if you're curious, that's when you figure out and find these opportunities that you otherwise never would, right?

1:25:25So what I say always is that if your curiosity on a scale of 1 to 10 is a 2, get it to a 5. You don't have to be 10. Not everyone's going to be like me or you who are super curious and want to know, or me. I'm super curious. I want to know everything. But if you're someone who's like, doesn't like don't care at all. That's a big, big no, no. I'm going to give you a little bit of an extra spin on that. So the extra spin on that is I'm very enamored with people who are creative now. So we used to be a little bit like, oh, they're going to be a musician or an artist or or they studied, you know, the arts at school or whatever.

1:26:02And society was a little bit like, you know, you know, what are they going to do? How are they going to support themselves? Well, in this new world, it used to be really important to be super smart, know lots of stuff. Well, smarts is now becoming a commodity. I have Claude in my pocket. I can ask Claude anything. So the real power going forward is going to be creativity, people who think differently, people who see different, people who are inquisitive. That is the power going forward. And when I talk about entrepreneurship, I have now opened up the dial to include artistic and artists. That's why we're doing this craft center as part of our mission.

1:26:45And creatives are, this is going to be the revenge of the creatives, the next stage of the world. I love that. I think that's such a great perspective, actually, because you're right, because anybody can now, with Claude and ChatGPT, you have smart in your pocket. So what are you going to do differently? I also think the other, just to add one more thing, I think empathy is very important for this exact same reason. Compassion is really important for these same reasons. Anything that gives you a human touch point that you can't find on a computer or AI is the next level. So with that being said, Richard, I thank you so much for being on this show.

1:27:22It's been a long time. I think it's been like almost two hours. So for your first podcast, you did fantastic. This was so much fun. Thank you for having me. You are an excellent guest. Honestly, I've learned so much from you. I'm not just saying that to be polite because you're on this show. I'm serious. You gave a lot of great information and you're a great storyteller. And that's another one very important. Right, too. It's on my list. It's on my list. Yeah, that's a great one. And so for anybody who wants to know more about what Richard is doing and bringing to the world of entrepreneurship, you can follow him or go check out his website at?

1:27:58Okay, well, first of all, I'm on Instagram on baker__house1921. and you go to our website, bakerhouse1921.com. I love that. Thank you so much for being on the show. And thank you all for listening and goodbye.